The Obama Transition Team’s Global Poverty objective calls for a doubling of the present economic development budget and refers to a “…bottom up approach.” If the new administration plans to expand present economic development, then MicroVenture Support.org believes that it has a fully evolved plan to provide a cost-effective solution strategy. The global MFI (Microfinance Institution) network is an existing economic pipeline that is not under the control of local officials and is essentially an independent means through which investment in promising SME’s (Small/Medium Enterprises) could be directed.
If you live in an underdeveloped country and you are not a member of a privileged class, work for the government, or a foreign company, you most likely have no job. When you have no job, you are by default, an entrepreneur. As a result there are literally millions of poor entrepreneurs in such countries. A ten square meter section of a New Delhi slum probably contains more enterprise, hard work, and innovation than ten square miles in Silicon Valley.
The problem is that hard work is not sufficient, nor is raw innovation, or even native intelligence. It requires specific knowledge to run a growing business, to manage a staff, establish supply and value chains. It requires expertise that is unfortunately in short supply in most developing countries. Using the MFI as the basis for grass roots economic development is both innovative and practical. The truth is that even though only ten percent of an MFI”s borrowers may, in fact, have the capacity to develop into growth enterprises that will expand and create jobs and prosperity. Actually, if only one percent of these striving new businesses reached some level of prosperity and hired only two or three people it would change the economies of whole regions and countries. The possibilities are absolutely endless and the challenge exhilarating.
The provision of investment capital alone will not create a flood of growth businesses for without knowledge and expertise even a doubling of capital will soon vanish into the open well of poverty. Any grass-roots, community based economic development strategy will require well structured, implemented, and adequately supported business incubators to help manage the health of the new enterprises and to train, mentor, and nurture their economic and management development. (Similar in structure to the Demming quality centers established in Japan in the 50’s) A hybrid coupling of the Business Center discussed above to the existing and growing micro bank network (Microfinance Institutions) could produce the desired results. MicroVenture Support has developed a comprehensive plan and budget to accomplish this goal. For the last twenty years the poor proprietor has been the focused market for the Microfinance Institution, (MFI) for these small micro banks which loan exclusively to the poor.
These are not a “Grant,” or give away programs. They are sustainable economically. They are self-funding. A key feature of the proposed strategic initiative is that the funds are not simply grants but loans and investment with significant up-side potential for positive returns. Our financial analysis shows that with an initial recoverable investment of less than five million (USD), a well run program could return ten million in five years and twenty million in ten years. This is an economic aid package even a conservative could love. A latter day Marshall plan with truly recoverable costs… This would be, “… socially responsible capitalism and a sustainable model for economic development in a time if economic crisis”.